<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549-1004


(Mark One)
[ X ]                              FORM 10-Q
              QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                 OF THE SECURITIES EXCHANGE ACT OF 1934
                 --------------------------------------


                For the Quarterly Period Ended September 30, 2001
                                               ------------------

                                       OR

                TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
 ( )                 OF THE SECURITIES EXCHANGE ACT OF 1934

<TABLE>
<S>                                                                                                     <C>
   For the Transition Period from                                   to
                                  ---------------------------------    ----------------------------------------------

   Commission File Number                  0-13084
                          -------------------------------------------------------------------------------------------

                                        WARRANTECH CORPORATION
   ------------------------------------------------------------------------------------------------------------------
                        (Exact name of registrant as specified in its charter)

                     Delaware                                            13-3178732
   ------------------------------------------------------------------------------------------------------------------
       (State or other jurisdiction of                               (I.R.S. Employer
       incorporation or organization)                               Identification No.)

         150 Westpark Way, Euless TX                                       76040
   ------------------------------------------------------------------------------------------------------------------
         (Address of principal executive offices)                       (Zip Code)

   Registrant's telephone number, including area code              (800) 544-9510
                                                      ---------------------------------------------------------------
</TABLE>

   --------------------------------------------------------------------------
   (Former name, former address and former fiscal year, if changed since last
                                     year)

      Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes __X__ No __

      Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.

<TABLE>
<S>                                                                  <C>
                    Class                                                       Outstanding at October 31, 2001
------------------------------------------------------------         ------------------------------------------
Common stock, par value $.007 per share                                              15,241,087 shares
</TABLE>

                                       1
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES


                                    I N D E X


<TABLE>
<CAPTION>
                                                                                                        Page No.
                                                                                                        --------
<S>                                                                                                    <C>
                                             PART I - FINANCIAL INFORMATION:


                Item 1:  Financial Statements


                    Condensed Consolidated Statements of Operations -
                           For the Three Months Ended September 30, 2001 and 2000 (Unaudited)....            3

                    Condensed Consolidated Balance Sheets at September 30, 2001
                           (Unaudited) and March 31, 2001........................................            4

                    Condensed Consolidated Statements of Cash Flows
                           For the Three Months Ended September 30, 2001
                           and 2000 (Unaudited)..................................................            6

                    Notes to Condensed Consolidated Financial Statements.........................            7

                Item 2:  Management's Discussion and Analysis of
                           Financial Condition and Results of Operations ........................           13




                                             PART II - OTHER INFORMATION


                Item 1:  Legal Proceedings.......................................................           17

                Item 4:  Submission of Matters to a Vote of Security Holders.....................           17

                Item 5:  Other Information.......................................................           18

                Item 6:  Exhibits and Reports on Form 8-K........................................           18

                Signature .......................................................................           19
</TABLE>



                                       2
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                  For the Three Months Ended               For the Six Months Ended
                                                         September 30,                           September 30,
                                               ----------------------------------   ---------------------------------------
                                                    2001               2000               2001                 2000
                                               ----------------   ---------------   -----------------    ------------------
<S>                                            <C>                <C>               <C>                  <C>
Earned Admin Fee (Net of amortization of            $9,265,963       $12,792,032         $18,493,585           $25,297,008
deferred costs)
                                               ----------------   ---------------   -----------------    ------------------
Costs and expenses
   Service, selling, and general and
      administrative                                 7,882,693         9,738,490          15,848,080            19,836,632

   Legal settlement                                  (824,332)                 -           (824,332)                     -

   Depreciation and amortization                     1,367,162         1,837,294           2,701,763             3,382,220

   Loss on abandonment of assets                             -         1,049,552                   -             1,049,552
                                               ----------------   ---------------   -----------------    ------------------
Total costs and expenses                             8,425,523        12,625,336          17,725,511            24,268,404
                                               ----------------   ---------------   -----------------    ------------------

Income from operations                                 840,440           166,696             768,074             1,028,604

Other income (expense)                                 148,007           237,673             340,996               404,785
                                               ----------------   ---------------   -----------------    ------------------

Income before provision for income taxes               988,447           404,369           1,109,070             1,433,389
Provision (benefit) for income taxes                   440,200         (288,014)             429,600               500,406

                                               ----------------   ---------------   -----------------    ------------------
Net income                                            $548,247          $692,383            $679,470              $932,983
                                               ================   ===============   =================    ==================

Earnings per share:
Basic                                                    $0.04             $0.05               $0.04                 $0.06
                                               ================   ===============   =================    ==================
Diluted                                                  $0.04             $0.05               $0.04                 $0.06
                                               ================   ===============   =================    ==================

Weighted average number of shares outstanding:
Basic                                               15,239,712        15,305,954          15,209,681            15,305,272
                                               ================   ===============   =================    ==================
Diluted                                             15,239,712        15,305,954          15,209,681            15,305,272
                                               ================   ===============   =================    ==================
</TABLE>




     See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                 (Unaudited)
                                                                September 30,       March 31,
                                                                    2001              2001
                                                             -------------------- --------------
<S>                                                          <C>                  <C>
           A S S E T S

           Current assets:
           Cash and cash equivalents                                  $3,084,307     $3,001,924

           Investments in marketable securities                          916,802        196,154

           Accounts receivable, (net of allowances of
            $1,464,385 and $1,079,946, respectively)                  10,900,984     12,152,515
           Other receivables, net                                      6,304,559      7,065,531
           Income tax receivable                                       5,352,021      5,378,648
           Deferred income taxes                                         265,195        571,182
           Prepaid expenses and other current assets                     950,160        964,929
                                                             -------------------- --------------
              Total current assets                                    27,774,028     29,330,883
                                                             -------------------- --------------

           Property and equipment, net                                10,218,098     11,898,890

           Other assets:
           Excess of cost over fair value of assets acquired
           (net of accumulated amortization of $5,825,405)             1,637,060      1,637,290
           Deferred income taxes                                       2,723,252      2,724,096
           Deferred direct costs                                      32,234,555     46,258,971
           Investments in marketable securities                        1,383,298      3,094,176
           Restricted cash                                               800,000        800,000
           Split dollar life insurance policies                          708,262        708,262
           Notes receivable                                              333,467        599,796
           Other assets                                                  104,809         64,809
                                                             -------------------- --------------
                     Total other assets                               39,924,703     55,887,400

                                                             -------------------- --------------
                               Total Assets                          $77,916,829    $97,117,173
                                                             ==================== ==============
</TABLE>




      See accompanying notes to condensed consolidated financial statements


                                       4
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                     (Unaudited)
                                                                     September 30,      March 31,
                                                                         2001             2001
                                                                    ---------------  ----------------
<S>                                                                 <C>              <C>
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Current maturities of long-term debt and capital lease obligations        $862,495          $801,265
Insurance premiums payable                                              16,143,805        19,100,164
Accounts and commissions payable                                         6,167,836         6,346,872
Accrued expenses and other current liabilities                           4,545,116         5,890,078
                                                                    ---------------  ----------------
   Total current liabilities                                            27,719,252        32,138,379
                                                                    ---------------  ----------------

Deferred revenues                                                       45,031,682        60,057,704

Long-term debt and capital lease obligations                               974,929         1,209,853

Deferred rent payable                                                      242,839           293,293
                                                                    ---------------  ----------------
   Total liabilities                                                    73,968,702        93,699,229
                                                                    ---------------  ----------------

Stockholders' equity:
   Preferred stock - $.0007 par value authorized - 15,000,000
     Shares issued - none at September 30, 2001 and
     March 31, 2001                                                              -                 -
   Common stock - $.007 par value authorized - 30,000,000 Shares
     issued  - 16,516,978  shares at September 30, 2001 and
     16,514,228 shares at March 31, 2001                                   115,599           115,580
   Additional paid-in capital                                           23,670,103        23,742,868
   Loans to directors and officers                                     (9,997,612)       (9,833,244)
   Accumulated other comprehensive income, net of taxes                   (18,532)          (31,949)
   Retained earnings (deficit)                                         (5,554,635)       (6,234,105)
                                                                    ---------------  ----------------
                                                                         8,214,923         7,759,150
Treasury stock - at cost, 1,277,266 shares at September 30, 2001
 and 1,415,171 shares  at March 31, 2001                               (4,266,796)       (4,341,206)
                                                                    ---------------  ----------------
        Total Stockholders' Equity                                       3,948,127         3,417,944
                                                                    ---------------  ----------------

                                                                    ---------------  ----------------
        Total Liabilities and Stockholders' Equity                     $77,916,829       $97,117,173
                                                                    ===============  ================
</TABLE>




     See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                For the Six Months Ended
                                                                     September 30,
                                                          ------------------------------------
                                                                2001                2000
                                                          ----------------    ----------------
<S>                                                       <C>                 <C>
Cash flows from operating activities:
  Net income                                                    $679,470             $932,983
  Total Adjustments to reconcile net income to net cash
     provided by operating activities:                          (291,578)           4,973,955
                                                          ----------------    ----------------
Net cash flows provided by operating activities                   387,892           5,906,938
                                                          ----------------    ----------------

Cash flows from investing activities:
  Property and equipment purchased-net of retirements         (1,019,774)         (1,168,389)
  Purchase of marketable securities                             (100,000)           (350,000)
  Decrease in notes receivable                                    266,329             365,111
  Proceeds from sales of marketable securities                  1,088,304           1,300,000
                                                          ----------------    ----------------
Net cash provided by investing activities                         234,859             146,722
                                                          ----------------    ----------------

Cash flows from financing activities:
    Repayments, notes and capital leases                        (540,368)           (997,180)
                                                          ----------------    ----------------
Net cash provided (used) in financing activities                (540,368)           (997,180)
                                                          ----------------    ----------------

Net increase in cash and cash equivalents                          82,383           5,056,480

Cash and cash equivalents at beginning of period                3,001,924          10,035,003
                                                          ----------------    ----------------
Cash and cash equivalents at end of period                     $3,084,307         $15,091,483
                                                          ----------------    ----------------

Supplemental Cash Flow Information:
Cash payments for:

   Interest                                                      $103,555            $137,837
                                                          ----------------    ----------------

   Income taxes                                                        $-            $245,477
                                                          ----------------    ----------------

Non-Cash Investing and financing activities:
    Property and equipment financed through capital
      leases                                                     $202,377            $264,704

    Capital leases refinanced                                     151,727                   -

    Increase in loans to officers and directors                  (164,368)           (155,200)

    Issuance of treasury stock                                     74,410                   -
</TABLE>




     See accompanying notes to condensed consolidated financial statements.



                                       6
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (UNAUDITED)

     1.  THE COMPANY

     Warrantech, through its wholly owned subsidiaries, markets and administers
     service contracts and extended warranties. The Company is a third party
     administrator for a variety of dealer/clients in selected industries and
     offers call center and technical computer services. The Company assists
     dealer/clients in obtaining insurance policies from highly rated
     independent insurance companies for all contracts and programs offered. The
     insurance company is then responsible for the cost of repairs or
     replacements for the contracts administered by Warrantech.

     The Company operates under three major business segments: Automotive,
     Consumer Products and International. The Automotive segment markets and
     administers extended warranties on automobiles, light trucks, recreational
     vehicles, motorcycles and automotive components. These products are sold
     principally by franchised and independent automobile dealers, leasing
     companies, repair facilities, retail stores and financial institutions. The
     Consumer Products segment markets and administers extended warranties on
     household appliances, electronics and homes. These products include home
     appliances, consumer electronics, televisions, computers, home office
     equipment and homes. These products are sold principally by retailers,
     distributors, manufacturers, utility companies, mortgage brokers, managing
     general agencies and financial institutions. Warrantech also direct markets
     these products to the ultimate consumer through telemarketing and direct
     mail campaigns. The International segment markets and administers outside
     the United States predominately the same products and services of the other
     business segments. The International segment is currently operating in
     Central and South America, Puerto Rico and the Caribbean.

     The predominant terms of the service contracts, extended warranties and
     replacement contracts range from twelve (12) to eighty-four (84) months.
     The Company acts as a third party administrator on behalf of the
     dealer/clients and insurance companies. The actual repairs and/or
     replacements required under the agreements are performed by independent
     third party authorized repair facilities or dealers. The cost of these
     repairs is borne by the insurance companies, which have the ultimate
     responsibility for the claims. The insurance policy indemnifies the
     dealer/clients against losses resulting from service contract claims and
     protects the consumer by ensuring their claims will be paid.

     Authorities in a limited number of jurisdictions in which the service
     contracts are sold and in which the Company's subsidiaries are the
     administrators of the contracts may seek to impose the obligation to pay
     claims on behalf of the Company's subsidiaries where they acted solely as
     administrator and were not the "obligor" under such service contracts. Such
     contracts are covered by insurance as well.

     Although the subsidiaries' obligations were insured by various insurance
     companies, it marketed and administered service contracts sold prior to
     April 1, 2000 in which it was the obligor. Some of those service contracts
     have not expired and are still in effect.

     The Company's service contract programs benefit consumers with expanded
     and/or extensions of product coverage for a specified period of time
     (and/or mileage in the case of automobiles and recreational vehicles),
     similar to that provided by manufacturers under the terms of their product
     warranties. Such coverage generally provides for the repair or replacement
     of the product, or a component thereof, in the event of its failure. The
     Company's service contract programs benefit the dealer/clients by providing
     enhanced value to the goods and services they offer. It also provides the
     opportunity for increased revenue and income while outsourcing the costs
     and responsibilities of operating an extended warranty program.


     2.  BASIS OF PRESENTATION

     The accompanying consolidated financial statements have been prepared by
     management and are unaudited. These interim financial statements have been
     prepared on the basis of accounting principles generally accepted in the
     United States of America ("GAAP") for interim financial information and
     with the instructions to Form 10-Q and Article 10 of Regulation S-X.
     Accordingly, they do not include all information and footnotes required by
     accounting principles generally accepted in the United States of America
     for complete financial statements. In the opinion of management, all
     adjustments (consisting of normal recurring accruals) considered necessary
     for a fair presentation of the financial position and operating results of
     the Company for the interim period have been included. Operating results
     for the three months ended September 30, 2001 are not necessarily
     indicative of the results that may be expected for the fiscal year ending
     March 31, 2002. For further information, refer to the consolidated
     financial statements and footnotes thereto included in the Company's Annual
     Report on Form 10K for the year ended March 31, 2001.



                                       7
<PAGE>

     3.  NEW ACCOUNTING STANDARD

     On June 29, 2001, the Financial Accounting Standards Board (FASB) approved
     for issuance Statement of Financial Accounting Standards ("SFAS") 142,
     "Goodwill and Intangible Assets", which is effective for fiscal years
     beginning after Dec. 15, 2001. SFAS 142 provides that goodwill and
     intangible assets with indefinite lives not be amortized, and instead, be
     tested for impairment annually and whenever there is an impairment
     indicator. Early adoption of SFAS 142 is permitted for companies with
     fiscal years beginning after March 15, 2001 but only if they have not
     issued their first quarter financial statements prior to adoption. The
     Company adopted SFAS 142 effective April 1, 2001 and ceased amortization of
     its goodwill. The following table presents pro forma condensed consolidated
     statements of operations of the Company for the three months and six months
     ended September 30, 2001 and 2000, as though SFAS 142 had not been adopted.
     The pro forma condensed consolidated statements of operations reflects
     $149,817 and $299,634 of amortization of goodwill in the three months and
     six months ended September 30, 2001, respectively. This goodwill would have
     been reflected in the statements of operations prior to the adoption of
     SFAS 142.

                    WARRANTECH CORPORATION AND SUBDIDIARIES
           PRO-FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                           For the Three Months Ended                For the Six Months Ended
                                                                  September 30,                            September 30,
                                                          ------------------------------          -------------------------------
                                                              2001             2000                   2001             2000
                                                          -------------    -------------          --------------   --------------
<S>                                                       <C>              <C>                    <C>              <C>
Earned Admininstrative  Fee (Net of amortization of
     deferred costs)                                        $9,265,963      $12,792,032             $18,493,585      $25,297,008
                                                          -------------    -------------          --------------   --------------
Costs and expenses

   Service, selling, and general and administrative         7,8882,693        9,738,490              15,848,080       19,836,632

   Legal settlement                                          (824,332)                -               (824,332)                -

   Depreciation and amortization                             1,516,979        1,837,294               3,001,397        3,382,220

   Loss on abandonment of assets                                     -        1,049,552                       -        1,049,552
                                                          -------------    -------------          --------------   --------------
Total costs and expenses                                     8,575,340       12,625,336              18,025,145       24,268,404
                                                          -------------    -------------          --------------   --------------

Income from operations                                         690,623          166,696                 468,440        1,028,604

Other income (expense)                                         148,007          237,673                 340,996          404,785
                                                          -------------    -------------          --------------   --------------

Income before provision for income taxes                       838,630          404,369                 809,436        1,433,389
Provision (benefit) for income taxes                           440,200        (288,014)                 429,600          500,406

                                                          -------------    -------------          --------------   --------------
Net income                                                    $398,430         $692,383                $379,836         $932,983
                                                          =============    =============          ==============   ==============

Earnings per share:
Basic                                                            $0.03            $0.05                   $0.02            $0.06
                                                          =============    =============          ==============   ==============
Diluted                                                          $0.03            $0.05                   $0.02            $0.06
                                                          =============    =============          ==============   ==============
</TABLE>



                                       8
<PAGE>

   4. OTHER COMPREHENSIVE INCOME

     The components of other comprehensive income are as follows:

<TABLE>
<CAPTION>
                                               For the Three Months Ended          For the Six Months Ended
                                                      September 30,                     September 30,
                                           ------------------------------------   ---------------------------
                                                 2001             2000               2001            2000
                                           ---------------   --------------       -----------    ------------
<S>                                        <C>               <C>                  <C>            <C>
Net income                                       $548,247         $692,383          $679,470        $932,983
Other Comprehensive Income, net of tax
   Unrealized gain (loss) on investments           43,545            4,120            16,191           6,767
   Foreign currency translation
     adjustments                                  (32,637)         139,455            (2,774)         79,034
                                           ---------------   --------------       -----------    ------------
Comprehensive Income                             $559,155         $835,958          $692,887      $1,018,784
                                           ===============   ==============       ===========    ============

Comprehensive income per share:
    Basic & Diluted                               $  0.04          $  0.05            $ 0.05          $ 0.07
                                           ===============   ==============       ===========    ============
</TABLE>

     The components of accumulated comprehensive income are as follows:

<TABLE>
<CAPTION>
                                            September 30,       March 31,
                                                2001              2001
                                           ---------------   --------------
<S>                                        <C>               <C>
Unrealized gain/ (loss) on investments           $29,460          $13,269

Accumulated translation adjustments              (47,992)         (45,218)
                                           ---------------   --------------
Accumulated other comprehensive income          ($18,532)        ($31,949)
                                           ===============   ==============
</TABLE>


5.  EARNINGS PER SHARE

     The computations of earnings per share are as follows:

<TABLE>
<CAPTION>
                                                      For the Three Months Ended          For the Six Months Ended
                                                             September 30,                     September 30,
                                                   ----------------------------------    ---------------------------
                                                        2001               2000             2001           2000
                                                   ----------------   ---------------    -----------    ------------
<S>                                                <C>                <C>                <C>            <C>
Numerator:
   Net income applicable to common stock                  $548,247          $692,383       $679,470        $932,983
                                                   ================   ===============    ===========    ============
Denominator:
    Average outstanding shares used in the
    computation of per share earnings:
      Common Stock issued-Basic shares                  15,239,712        15,305,954     15,209,681      15,305,272
                                                   ----------------   ---------------    -----------    ------------

                           -Diluted shares              15,239,712        15,305,954     15,209,681      15,305,272
                                                   ================   ===============    ===========    ============
Earnings Per Common Share:
   Basic & Diluted                                           $0.04             $0.05          $0.04           $0.06
                                                   ================   ===============    ===========    ============
</TABLE>



                                       9
<PAGE>


6.   SEGMENTS

     The Company defines its operations into three business segments:
     Automotive, Consumer Products and International. Other includes general
     corporate income and expenses, inter-segment sales and expenses and other
     corporate assets not related to the three business segments.

<TABLE>
<CAPTION>
                                               Consumer                      Reportable
THREE MONTHS ENDED             Automotive      Products      International    Segments        Other           Total
------------------            -------------  ------------   --------------   ----------     ---------        -------
<S>                           <C>            <C>            <C>              <C>          <C>             <C>
SEPTEMBER 30, 2001
------------------
Earned administrative fee        $4,951,752    $3,788,346       $667,281      $9,407,379    ($141,416)      $9,265,963
Profit (loss) from operations     3,133,193     (802,319)      (125,828)       2,205,046   (1,364,606)         840,440
Pretax Income (Loss)              2,291,301   (1,289,763)      (233,953)         767,585       220,862         988,447
Net Interest Income                  13,778         2,233         11,196          27,207       189,920         217,127
Depreciation/Amortization           101,492       436,457         18,666         556,615       810,547       1,367,162

SEPTEMBER 30, 2000
------------------
Earned administrative fee        $4,931,468    $7,470,833       $488,457     $12,890,758     $(98,726)     $12,792,032
Profit (loss) from operations     3,082,799     2,420,750    (1,118,294)       4,385,255   (4,218,559)         166,696
Pretax Income (Loss)              2,104,166       534,047    (1,445,338)       1,192,875     (788,506)         404,369
Net Interest Income                  17,733        18,070        (4,767)          31,036       199,686         230,722
Depreciation/Amortization           211,178       470,261        502,278       1,183,717       653,577       1,837,294

SIX MONTHS ENDED
------------------
SEPTEMBER 30, 2001
------------------
Earned administrative fee        $8,426,769    $8,433,220     $1,913,695     $18,773,684    $(280,099)     $18,493,585
Profit (loss) from operations     4,641,124   (1,224,112)        185,976       3,602,988   (2,834,914)         768,074
Pretax Income (Loss)              3,243,264   (2,462,484)      (116,929)         663,851       445,219       1,109,070
Net Interest Income                  34,212         6,149         11,197          51,558       416,778         468,336
Depreciation/Amortization           203,906       857,993         37,751       1,099,650     1,602,113       2,701,763
Total Assets                     31,013,117    36,545,935      3,477,207      71,036,259     6,880,570      77,916,829

SEPTEMBER 30, 2000
------------------
Earned admin fee                 $9,144,721   $15,372,085       $978,418     $25,495,224    $(198,216)     $25,297,008
Profit (loss) from operations     5,457,468     5,299,935    (2,385,599)       8,371,804   (7,343,200)       1,028,604
Pretax Income (Loss)              3,586,890     1,701,840    (3,021,742)       2,266,988     (833,599)       1,433,389
Net Interest Income                  29,349        12,250       (15,853)          25,746       365,667         391,413
Depreciation/Amortization           422,827       941,403        731,549       2,095,779     1,286,441       3,382,220
Total Assets                     57,304,290    53,777,165      5,825,747     116,907,202    17,755,895     134,663,097
</TABLE>



7.   LEGAL PROCEEDINGS

     AMERICAN HOME ASSURANCE CO., ET AL, V. WARRANTECH AUTOMOTIVE, INC., 99 CIV.
     12040 (BSG)

     SERVICE GUARD INSURANCE AGENCY, INC. V. WARRANTECH AUTOMOTIVE, INC., NEW
     HAMPSHIRE INSURANCE COMPANY, RONALD GLIME AND CHRISTOPHER FORD, CAUSE NO.
     99-12650, 126TH JUDICIAL DISTRICT COURT OF TRAVIS COUNTY, TEXAS

     NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA V. WARRANTECH
     CORPORATION AND WARRANTECH AUTOMOTIVE, INC., UNITED STATES DISTRICT COURT
     (S.D.N.Y.)

     Each of the matters set forth above was settled pursuant to a certain
     Settlement Agreement and Release of Claims, effective as of July 25, 2001
     (the "Agreement"). As referenced in the title of the Agreement, each party
     released all other relevant parties from all claims asserted in any of the
     litigations and all claims that could have been asserted in any of said
     litigations. Furthermore, releases were granted with respect to all



                                       10
<PAGE>

         potential future claims arising out of the subject matter of any of the
         litigations. The financial impact for this settlement is reflected in
         the Management's Discussion and Analysis beginning on page 13 in this
         quarterly report on Form 10Q.

         STAPLES THE OFFICE SUPERSTORE, INC.
         Staples the Office Superstore, Inc. v. ACE Property and Casualty
         Insurance Company, Warrantech Consumer Product Services, Inc. and
         Warrantech Help Desk, Inc., No. 2001-02277, District Court of Harris
         County, Texas. In accordance with a Service Contract Administration
         Agreement, Warrantech administered a service contract program for
         Staples. For a period of time, that program was underwritten by ACE
         Property and Casualty Insurance Company (f/k/a CIGNA Property and
         Casualty Insurance Company). In December 2000, ACE informed Warrantech
         that it was implementing changes in the process pursuant to which
         claims underwritten by ACE were to be adjusted and paid. Although
         Warrantech would continue to take inbound calls and validate coverage,
         ACE would now confirm diagnoses, dispatch service and pay servicer
         invoices. Shortly after implementation of these changes, Staples
         reported that it had witnessed a material increase in complaints from
         customers holding service contracts underwritten by ACE. These
         complaints were primarily focused on inordinate delays in service
         delivery. Although Staples discussed these problems with Warrantech,
         ACE continued to operate under the new claims handling procedures. In
         an effort to satisfy customer complaints, Staples states that it has
         spent a substantial amount of its own funds to repair or replace
         covered products.

         This action has two distinct components. Initially, Staples sought a
         Temporary Injunction against ACE and Warrantech. The motion, as filed,
         asked that (i) Staples be given control of the toll free telephone
         lines on which customers call for service and (ii) ACE be required to
         re-institute those claims handling procedures that were in place prior
         to December 2000. That motion has been denied but the parties have
         entered into an Agreed Order that governs the administration of the
         Staples portfolio of service contracts.

         Staples is also pursuing an action for damages against both ACE and
         Warrantech. It seeks to recover the amounts it has spent to satisfy its
         customers and certain unspecified amounts representing loss of business
         and damage to its reputation. Its entitlement to these amounts is based
         on a variety of theories including breach of contract, fraud and
         tortuous interference with business. Warrantech believes the claims as
         asserted against it are without merit. Warrantech also believes it has
         meritorious claims against ACE arising out of these allegations which
         claims may be asserted in this litigation or in the arbitration
         referred to above. The document production phase of discovery has been
         completed and the parties are presently engaged in depositions.
         Settlement discussions have taken place but no resolution of the issues
         underlying this litigation is believed to be imminent at this time.

         MICHAEL A. BASONE
         Mr. Basone was a former Executive Vice President and Chief Operating
         Officer of Warrantech Corporation. He resigned his position in February
         2000. Several months after resigning, Mr. Basone contacted the Company
         through his attorney requesting a payment equal in amount to what Mr.
         Basone would have received had he completed the term of his employment
         agreement. His theory of entitlement was based on the assertion that
         the Company's conduct toward Mr. Basone was such that he was forced to
         resign, thereby resulting in a "constructive termination" without
         cause. The Company believes this assertion is completely without merit
         and has rejected Mr. Basone's demand for payment. In accordance with
         the terms of his employment agreement, Mr. Basone has filed a Demand
         for Arbitration with the American Arbitration Association that seeks
         damages in the amount of $300,000. The document production phase of
         discovery has been completed and the parties are presently engaged in
         depositions.

         Warrantech is not able to estimate its potential liability in any of
         the above actions although Warrantech believes that these matters are
         without merit, and accordingly, no reserves for potential liabilities
         have been provided for any of these actions.


                                       11
<PAGE>



8.   STOCK OPTIONS

     Simultaneously with the settlement of the litigation with Service Guard
     Insurance Agency, Inc., American International Group, Inc. ("AIG") and
     related entities, the Company granted AIG options on August 24, 2001, to
     purchase two (2) million shares of Warrantech's common stock at a price of
     $2.00 per share. The options are for a period of five years. Warrantech has
     the right to redeem the options at any time during the option period if its
     shares trade at a price of $3.00 per share or more on any five consecutive
     trading days. The redemption price is $.001 per option. If Warrantech
     elects to redeem the shares, AIG will have the right to exercise the
     options immediately prior to the redemption. In the event that AIG
     exercises all of the options, it would hold an equity position in
     Warrantech of approximately 12% of the Company's outstanding common shares.



                                       12
<PAGE>


                     WARRANTECH CORPORATION AND SUBSIDIARIES

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

                            FORWARD LOOKING STATEMENT

Except for the historical information contained herein, the matters discussed
below or elsewhere in this quarterly report may contain forward-looking
statements that involve risks and uncertainties that could cause actual results
to differ materially from those contemplated by the forward-looking statements.
The Company makes such forward-looking statements under the provisions of the
"safe harbor" section of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements reflect the Company's views and assumptions, based on
information currently available to management. Such views and assumptions are
based on, among other things, the Company's operating and financial performance
over recent years and its expectations about its business for the current and
future fiscal years. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, it can give no
assurance that such expectations will prove to be correct. Such statements are
subject to certain risks, uncertainties and assumptions, including, but not
limited to, (a) prevailing economic conditions which may significantly
deteriorate, thereby reducing the demand for the Company's products and
services, (b) availability of technical support personnel or increases in the
rate of turnover of such personnel, resulting from increased demand for such
qualified personnel, (c) changes in the terms or availability of insurance
coverage for the Company's programs, (d) regulatory or legal changes affecting
the Company's business, (e) loss of business from or significant change in
relationship with, any major customer of the Company, (f) the ability to
successfully identify and contract new business opportunities, both domestically
and internationally, (g) ability to secure necessary capital for general
operating or expansion purposes, (h) ability to secure an alternate source of
payment of claims under the vehicle service contracts, or (i) the amount of
claims required to be paid by the Company under the service contacts.
Additionally, if any of the insurance companies which insure the service
contracts marketed and administered by the Company were unable to pay the
claims under the service contracts, it could have a materially adverse effect
on the Company's business. Should one or more of these or any other risks or
uncertainties materialize or develop in a manner adverse to the Company, or
should the Company's underlying assumptions prove incorrect, actual results of
operations, cash flows or the Company's financial condition may vary materially
from those anticipated, estimated or expected.

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2000

Net earned administrative fees for the three month period ended September 30,
2001 decreased to $9,265,963 as compared with $12,792,032 for the same period
last year, a decrease of $3,526,069 or 27.6%. The change was primarily due to
the loss of Staples as a customer, partially offset by an increase in the
International segment's business.

The Automotive segment net earned administrative fees remained flat at
$4,951,752 for the quarter ending September 30, 2001 as compared to $4,931,468
in the same quarter last year. Lower sales during the current quarter compared
to the prior year quarter were offset by increased deferred revenues from prior
periods which were recognized this quarter versus the same quarter last year.
The Consumer Products segment net earned administrative fees decreased to
$3,788,346 for the quarter ended September 30, 2001 from $7,470,833 for same
period last year. The change was primarily attributed to the loss of Staples as
a customer, partially offset by increases in business from other dealers within
the segment.

The International segment net earned administrative fees increased 36.6% to
$667,281 for the three month period ended September 30, 2001 from $488,457 for
the same period a year ago. The South American market contributed higher volumes
from new customers in Peru and Chile and increased market penetration from
existing customers in Chile. These increases more than offset the loss net
earned administrative fees from the United Kingdom, which was closed September
30, 2000.

Service, selling and general and administrative expenses (SG&A), including a
legal settlement, for the three months ended September 30, 2001 were reduced by
$2,680,129 or 27.5% to $7,058,361 as compared to $9,738,490 for the three months
ended September 30, 2000. The decrease reflects the Company's improved call
center technologies, cost



                                       13
<PAGE>

containment measures, lower legal expenses and the closing of the United Kingdom
operations. Total employee and payroll related costs were down 18.3% from
$5,725,995 for the quarter ended September 30, 2000 to $4,840,314 in the current
quarter. Outside services, including consulting and legal fees, were down
$830,742 from $731,951 in the quarter ended September 30, 2000 to negative
($98,791) in the current quarter. This decrease reflects an $824,332 legal
settlement with AIG during the second quarter 2002 for reimbursement of legal
expenses.

Depreciation and amortization expenses were reduced by $470,132 to $1,367,162
for the three months ended September 30, 2001 as compared to $1,837,294 for the
same period last year. Decreases in depreciation and amortization resulting from
the closing of the United Kingdom operations and the early adoption of SFAS 142,
which allowed the Company to elect not to amortize its remaining goodwill, were
partially offset by increases in Corporate depreciation.

Loss on abandonment of assets was $1,049,552 for the quarter ended September 30,
2000. Effective September 30, 2000, the Company ceased operations in the United
Kingdom as a result of unprofitable operations and recorded a loss on its
operations in the quarter ended September 30, 2000.

Income from operations for the second quarter 2002 was $840,440 compared to
$166,696 for the second quarter 2001. Income decreases, as a result of the loss
of the Staples account, were offset by the reduction in losses from the United
Kingdom operations and the benefits from the overall reduction in SG&A.

The provision for income taxes was $440,200 for the second quarter 2002 compared
to a benefit of $288,014 for the same period last year. The benefit in the
second quarter 2001 resulted from the loss on abandonment of $1,049,552 of net
assets from the Company's United Kingdom operations.

Net income for the three months ended September 30, 2001 was $548,247 or $0.04
per diluted share compared to a net income of $692,383 or $0.05 per diluted
share for the comparable period last year. This change is the result of factors
as described above.

SIX MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THE SIX MONTHS ENDED SEPTEMBER
30, 2000

Net earned administrative fees for the six month period ended September 30, 2001
decreased to $18,493,585 as compared with $25,297,008 for the same period last
year, a decrease of $6,803,423 or 26.9%. The change was primarily due to the
loss of Staples as a customer. Excluding the loss of Staples, the Company
experienced a slight increase in net earned administrative fees from its
existing and new dealers.

The Automotive segment net earned administrative fees decreased to $8,426,769
for the six months ending September 30, 2001 from $9,144,721 in the same period
last year. Lower sales during the first six months compared to the prior year
six months were partially offset by increased deferred revenues from prior
periods which were recognized this period versus the same period last year. The
Consumer Products segment net earned administrative fees decreased to $8,433,220
from $15,372,085 for same period last year. The change was primarily attributed
to the loss of Staples as a customer, partially offset by increases in business
from other dealers within the segment.

The International segment net earned administrative fees increased 95.5% to
$1,913,695 for the six month period ended September 30, 2001 from $978,418 for
the same period a year ago. The South American market contributed higher volumes
from new customers in Peru and Chile and increased market penetration from
existing customers in Chile. These increases more than offset the loss of net
earned administrative fees from the United Kingdom which was closed September
30, 2000.

Service, selling and general and administrative expenses for the six months
ended September 30, 2001, including the legal settlement were reduced by
$4,812,884 or 24.3% to $15,023,748 as compared to $19,836,632 for the six months
ended September 30, 2000. The decrease reflects the Company's improved call
center technologies, cost containment measures and the closing of the United
Kingdom operations. Total employee and payroll related costs were down
$2,135,359 or 18.3% from $11,644,403 for the six months ended September 30, 2000
to $9,509,044 for the six months ended September 30, 2001. Additionally, the
decrease in SG&A expenses reflects a legal settlement with AIG for reimbursment
of legal fees associated with its lawsuit against the Company. Outside services,
including consulting



                                       14
<PAGE>
and legal fees, were down $1,342,363 (76.7%) from $1,748,145 in the six months
ended September 30, 2000 to $405,782 in the first six months ended September 30,
2001, primarily due to the legal settlement with AIG.

Depreciation and amortization expenses were reduced by $680,457 to $2,701,763
for the six months ended September 30, 2001 as compared to $3,382,220 for the
same period last year. Decreases in depreciation and amortization resulting from
the closing of the United Kingdom operations and the early adoption of SFAS 142,
which allowed the Company to elect not to amortize its remaining goodwill, was
partially offset by increases in Corporate depreciation.

Loss on abandonment of assets was $1,049,552 for the six months ended September
30, 2000. Effective September 30, 2000, the Company ceased operations in the
United Kingdom as a result of unprofitable operations and recorded a loss on its
operations.

Income from operations for the first six months ended September 30, 2001 was
$768,074 compared to $1,028,604 for the first six months ended September 30,
2000. Income decreased as a result of the loss of the Staples account were
offset by the reduction in losses from the United Kingdom operations and benefit
from the legal settlement with AIG.

Net income for the first six months ended September 30, 2001 was $679,470 or
$0.04 per diluted share compared to a net income of $932,983 or $0.06 per
diluted share for the comparable period last year. This change is the result of
factors as described above.

                        LIQUIDITY AND FINANCIAL RESOURCES


RECENT DEVELOPMENTS - SIGNIFICANT INSURER IN LIQUIDATION
A number of uncertainties exist at September 30, 2001 that could have an impact
on the Company's future financial condition, including but not limited to, the
effect on the Company due to the liquidation of Reliance Insurance Company
("Reliance"). During the second quarter 2001, the Insurance Commission of
Pennsylvania informed the Company that Reliance will be liquidated and cease
making payments on claims. The Pennsylvania Insurance Commissioner determined
that Reliance is not likely to be able to satisfy all of the claims that will be
submitted to it due to the circumstances arising out of the September 11, 2001
terrorist attacks on the World Trade Center. Reliance underwrote approximately
48% of the automotive service contracts that were sold during a period of
approximately one and one-half years ending in November 2000. Approximately 52%
of the automotive service contracts sold during that time period are not
affected by the Reliance liquidation. Service contracts sold before and after
that period are not affected because they are underwritten by other carriers.

The Company is attempting to ascertain from the Pennsylvania Insurance
Department, the amount of Reliance assets that will be available to pay the
vehicle service contract claims and when such fund will become available.
Additionally, the Company must wait to ascertain the amount of Pennsylvania
Insurance Department Insurance Funds and any other state guaranty funds, if any,
are available and if any Federal subsidies to the insurance industry in general
or Reliance specifically, if any, will be made available as a result of the
terrorist attacks to pay vehicle service contract claims. The above situations
could take years before resolution is obtained. Additionally, the Company is
considering several alternative arrangements to cover claims under the vehicle
service contracts, including a long-term arrangement with its current
underwriter. Such alternative arrangements are anticipated to be consummated
before the fiscal year end.

If assets from Reliance are not available to pay the claims and/or alternative
arrangements are not made, Warrantech Automotive, a wholly owned subsidiary of
the Company, may ultimately be required to honor claims on contracts in which it
is named as obligor. Such potential claims represent approximately 48% of the
total automotive service contracts underwritten by Reliance. If required to
honor claims, this may severely restrict the Company's working capital and its
ability to meet its obligations in a timely manner and could have a material
adverse effect on the Company, its results of operations, financial condition
and cash flows.

Due to the terrorist attacks on the World Trade Center on September 11, 2001,
the Company is aware that significant financial pressures have been placed on
insurance companies; however, the Company is not aware that either American
International Group, Inc. ("AIG") or Great American Insurance Company, which
insure most of the obligations under the service contracts marketed and
administered by the Company, other than Reliance, are under any such financial
pressures. If, for any reason, the insurance companies were not able to cover
claims under the service contracts marketed and administered by the Company due
to financial insolvency or other reasons, it could have a materially adverse
effect on the Company's future business.

FINANCIAL POSITION
As of September 30, 2001, total cash and short term investments totaled
$4,001,109, up from $3,198,078 at fiscal year end March 31, 2001. Cash generated
from operating activities decreased from $5,906,938 for the six months ended


                                       15
<PAGE>

September 30, 2000 to $387,892 for the first six months ended September 30,
2001. The Company's primary sources of cash during the first six month of fiscal
year 2002 were proceeds from the sales of marketable securities of $1,088,304
and cash provided by operating activities $387,892 primarily resulting from the
reduction of its outstanding accounts receivable.

Working capital at September 30, 2001 was $54,776. The Company believes that
internally generated funds, resulting primarily from a continuation of reducing
its average days outstanding accounts receivable, will be sufficient to finance
its current operations for at least the next twelve months. The Company is
aggressively pursuing new business both domestically and internationally to fund
future working capital. To provide flexibility to its working capital, the
Company is actively seeking to replace its line of credit that expired in fiscal
year 2001. The Company plans to continue to contain its SG&A costs and utilize
technologies for operational efficiencies to further enhance both its operating
income and cash flows from operating activities.

During the first six months ended September 30, 2001, the Company spent
$1,019,774 for property and equipment compared to $1,168,389 for the same period
last year. These expenditures primarily result from software development costs
and computer equipment, as the Company continues to invest to enhance its
technologies and improve operational efficiencies. The Company has ongoing
relationships with equipment financing companies and intends to continue
financing certain future equipment needs through lease/purchase transactions.
The total amount financed through these transactions during the six months ended
September 30, 2001 amounted to $202,377 compared to $264,704 during the six
months ended September 30, 2000. The Company repaid $540,368 in notes and
capital leases in the first six months of fiscal year 2002.

The effects of inflation have not been significant to the Company. Management
does not expect inflation to have a significant impact on the results of
operations or financial condition in the foreseeable future.



                                       16
<PAGE>


                           PART II. OTHER INFORMATION

Item 1.       Legal Proceedings

              Litigation - The Company from time to time is involved in
              litigation incidental to the conduct of its business. Reference
              Footnote 7 to the Financial Statements in this Quarterly Report
              regarding information associated with legal proceedings.

Item 2.       Changes in Securities

              Not applicable.

Item 3.       Defaults Upon Senior Securities

              Not applicable.

Item 4.       Submission of Matters to Vote of Security Holders

              On September 25, 2001, the Annual Meeting of the Stockholders of
              the Company was held in New York City, New York, for the purpose
              of electing a Board of Directors and voting on the proposals
              described below. There were no solicitations in the opposition to
              management's nominees for director as listed in the proxy
              statement.

              Each of the directors nominated by the Board (which number
              constitutes the entire Board of the Company) and listed in proxy
              statement was elected with the votes as follows:

<TABLE>
<CAPTION>
                  NOMINEES                 SHARES FOR           SHARES WITHHELD
                  --------                 ----------           ---------------
<S>                                       <C>                  <C>
              Joel San Antonio             12,472,745           236,887
              William Tweed                12,472,745           237,187
              Jeff J. White                12,472,745           237,187
              Lawrence Richenstein         12,472,745           236,887
              Gordon A. Paris              12,472,745           236,887
              Ronald Glime                 12,472,745           236,887
</TABLE>

              An amendment to the Company's 1998 Employee Incentive Stock Option
              Plan, to increase the maximum aggregate number of shares of Common
              Stock which may be issued upon the exercise of options granted
              under the 1998 Employee Incentive Stock Option Plan from 1,041,987
              to 1,641,987 shares, was approved with the following vote:
              12,277,822 shares for; 405,708 shares against; 26,082 shares
              abstaining.



                                       17
<PAGE>


Item 5.       Other Information

              Not applicable.

Item 6 (a)    Exhibits

              10 (a) - 1998 Employee Incentive Stock Option Plan of Warrantech
              Corporation, as amended and restated, effective September 25,
              2001.

              10 (b) - Nonqualified stock option agreement dated August 22,
                      2001, by and between Warrantech Corporation, American
                      International Group, Inc. ("Optionee"), and others.

Item 6 (b)    Reports on 8-K

              On September 10, 2001, the Company filed a Current Report on Form
              8-K. In this Current Report, Warrantech reported that,
              simultaneously with the settlement of the litigation with Service
              Guard Insurance Agency, Inc., American International Group, Inc.
              ("AIG") and related entities on August 24, 2001, it granted AIG
              options to purchase two (2) million shares of Warrantech's common
              stock at a purchase price of $2.00 per share. The option is for a
              period of five years. Warrantech has the right to redeem the
              options at any time during the term of the options if Warrantech
              shares trade at a price of $3.00 per share or more on any five
              consecutive trading days. The redemption price is $.001 per
              option. If Warrantech elects to redeem the shares, AIG will have
              the right to exercise the options immediately prior to the
              redemption. In the event that AIG exercises all of the options, it
              would hold an equity position in Warrantech of approximately 12%
              of the Company's outstanding shares.




                                       18
<PAGE>


                                    SIGNATURE




         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.




                            WARRANTECH CORPORATION
                    --------------------------------------------------------
                       (Registrant)



                      S/N/S  Richard F. Gavino

                    --------------------------------------------------------
                       Richard F. Gavino - Executive Vice President, Chief
                       Financial Officer, Chief Accounting Officer and Treasurer
                       (Chief Financial Officer and Duly Authorized Officer)



Date: November 14, 2001



                                       19
<PAGE>



                     WARRANTECH CORPORATION AND SUBSIDIARIES

                                  EXHIBIT INDEX


<TABLE>
<CAPTION>
   EXHIBIT LIST            DESCRIPTION OF EXHIBIT
   ------------            ----------------------
<S>                       <C>
     10 (a)                1998 Employee Incentive Stock Option Plan of Warrantech Corporation, as amended and
                           restated, effective September 25, 2001.

     10 (b)                Nonqualified stock option agreement dated August 22, 2001, by and between Warrantech
                           Corporation, American International Group, Inc. ("Optionee"), and others.
</TABLE>



                                       20